INSIDE RETAILING

Chicago key to Starbucks' broader buzz

August 18, 2007|BY SANDRA M. JONES

Just as theater producers recognized years ago that if it played in Peoria, it would play anywhere, retailers know that Chicago, with its diverse neighborhoods and no-nonsense sensibility, is an ideal place to test new retail ideas.

Howard Schultz, founder and chairman of Starbucks Corp., discovered that two decades ago when he decided to make Chicago the coffee chain's test ground for expansion outside the Pacific Northwest.

"If Chicago didn't work, we wouldn't be in business today," Schultz said in a phone interview this week as the Seattle-based coffeehouse chain prepares to mark its 20th anniversary in Chicago.

Starbucks opened its first Chicago shop at 111 W. Jackson Blvd. in the Loop on Oct. 19, 1987, near the Chicago Board of Trade. It was Black Monday, the day the stock market crashed. It was a shaky start.

"There were many days when we thought Chicago wasn't going to work," Schultz said.

He soon realized he made a "very big mistake" in that first store. It didn't have an inside door to the office building. It was frustrating to know that scores of workers on the other side of the wall were eager for a coffee break, but unwilling to venture outside in the Chicago winter to get it.

Schultz, who grew up poor in a Brooklyn housing project, spent a lot of time in that store and in Chicago trying to prove to himself, and to potential investors, that America was ready for a European coffeehouse experience.

The turning point, he said, occurred a couple years into the Chicago experiment.

Schultz was visiting the Starbucks on Rush Street near Oak Street in the heart of the Gold Coast, which is now among the highest-volume Starbucks in the chain, and saw a UPS truck double-park in front of the store and the driver go inside. He got in line behind the UPS driver and watched him hand a battered Thermos to the barista and ask for a double tall latte.

"It's where we learned that Starbucks became an affordable luxury for all kinds of people," Schultz said.

The first store on Jackson is no longer there. (Italian coffeehouse Lavazza is in the building now.) And Starbucks faces increased competition as McDonald's and Dunkin' Donuts move into the mixed-coffee-drink business. But with more than 14,000 stores in 40 countries and a goal to eventually operate more than 40,000 cafes worldwide, Starbucks does indeed play anywhere.

Well, just about anywhere.

The world's largest coffee chain shut down an outpost in China's Forbidden City last month, where it had operated since 2000, under local pressure that the iconic American brand was trampling Chinese culture.

"The hardest thing for any retailer and merchant to do is to preserve the core business while enhancing the business," Schultz said. "That's the art of being a great merchant."